“BUY” with 12-month target price (TP) of Rp.600/share

Our 12-month target price of Rp.600 is based on a DCF valuation model which assumes net income growth of 16% CAGR 2009A-2013F, dividend payout ratio of 30%, sales growth of 12%, and cost of capital at 13%.

High ROE/low debt play

The counter offers a good structural 2011F ROE (18%) play from low net gearing (0.56x) at competitive valuation trading at multiples of PER2011F (14x) & PBV2011F (2.7x). Higher pricing power, lack of new players and asset turnover may be key drivers to further propel ROE in the future.

Growing further in 2011 (expanding capacity)

We predict 2011F capital expenditure (capex) rising 43% to spur sales growth by 10% and earnings growth by 14% respectively.

Riding the economic cycle (domestic demand theme)

The counter rides the domestic demand theme driven by the current economic environment cycle. A robust economic growth (6.5%) in 2011F, stronger currency, & rising spending power (consumer confidence) has a positive impact to support volume, since the consumer sector, particularly the food industries’ 70% tinplate packaging needs are supplied by NIKL.

Yuganur Wijanarko
yuganur@hdx.co.id

Mauli Andi Padlan
mauli@hdx.co.id